Leaving carbide for oxychlorination — the Takasago VCM plant (1967)

What it meant for an own-technology company to buy only the feedstock step

A company that had industrialised PVC on its own technology, and had made that the basis of its domestic lead, bought one thing from outside: the process for the feedstock. The material of the decision was a cost comparison — 58 yen a kilogram against 38 — and $14.2M (¥5bn) went into Takasago, more than the company’s own paid-in capital of $12.2M (¥4bn). Its own technology carried it as far as the resin; the feedstock step was bought from others and put in place quickly. Reading, at a moment when domestic naphtha supply was beginning to tighten, that it should attach itself to complex ethylene was, on the evidence available at the time, sound.

But the twenty-yen gap was a figure that Osawa Takashi, the managing director, himself qualified: it would not be reached in the early years of operation. Within a few years of Takasago’s completion the PVC market collapsed, and after voluntary output cuts in 1971 the industry entered a recession cartel in January 1972. The miscalculation lay not in whether to convert but in the fact that every firm finished the same arithmetic at the same time. Once six centres stood, lower cost conferred no advantage. What moving the feedstock to petroleum bought was not superiority over rivals but the condition for remaining in an industry that had gone large-scale.